For many people, coin collecting is just a hobby. But for a few people, their hobby can turn into quite an investment portfolio. Knowledge and careful planning can provide a pathway to building a world-class coin collection that will appreciate in value over time.
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Collect What You Like
The people that make the most money by investing in coins are coin collectors first and investors second. Just like the stock market, knowledgeable investors make the most money in the long run. True, there been studies done that have monkeys throwing darts at a list of stocks and then compared their return to the market on average. But coin collecting is a lot more complicated than investing in stocks.
Investing in coins is a long-term investment approach. Several factors determine the value of coins and all of them can come into play at different times. Therefore, collect the coins that interest you the most. Your interest may change over time, and you may start one type of coin collection, leave it to start a different kind of coin collection and then come back later to finish it. Changing your interest is only human and is part of the fun of collecting coins.
Don't confuse the bullion price of a coin with its numismatic price. In other words, if a majority of the coin's value is based on its precious metal content, you are then investing in precious metals and not in a coin. One of the best ways to start investing in coins is to begin with a 20th-century type set of United States coins. This type of coin collection will introduce you to a wide variety of coins and allow you to choose which ones best meet your interest and coin collecting budget.
If you are collecting coins that you like, you will be interested in them and will learn more about them. Knowledge is a valuable asset in any investment strategy.
02 of 05
Just like in stocks and equities, research is required to make wise purchasing decisions. The same holds true in coin collecting. Educate yourself on the particular coin series you are considering to start your coin collection. Do more looking and listening than buying in the beginning. As you become more experienced with a particular set of coins, you will be able to make educated decisions and buy coins that will appreciate in value over time.
There is an adage that states, "Buy the book before you buy the coin." In other words, take the time to do some research and educate yourself on the coins that you are considering buying. If you do not know what you are buying, you are more likely to get ripped off and end up with some "bad coin investments."
The Internet is also a vast source of knowledge for coin collecting. Some of it good, and some of it bad. Unfortunately, everybody and anybody can publish anything on the Internet. Take some time to find reliable sources of information on the Internet. Remember, if the website you are using to educate yourself can also sell you the coins you are considering buying, you are listening to a salesperson and not necessarily an advisor.
03 of 05
Develop a Relationship With a Coin Dealer
One of your best friends when it comes to investing in coins is a knowledgeable and trustworthy coin dealer. It may be a local coin dealer that has a coin shop in town or a coin dealer that regularly attends local coin shows. Just because a coin dealer has a brick and mortar storefront, doesn't necessarily make him honest and trustworthy.
Unfortunately, sometimes the only way you will know if a dealer is honest and trustworthy is to go to the school of "hard knocks" and buy a coin that is a bad investment. Talk to other coin collectors by joining a local coin club and find out who has had good luck with a local dealer. Remember, you must make your own decision and decide which coin dealers you will trust and which ones you will stay away from.
Once you find a trustworthy coin dealer, make sure that you purchase your coins through that dealer. It is easy to take the knowledge that you learn from a dealer and venture off into the Internet to try to save a few dollars. If you are not purchasing any coins from that coin dealer, he may be less likely to spend his valuable time with you to educate you on a coin that you have no intention on purchasing from him.
04 of 05
Avoid Investment Mistakes
Another old adage that is pertinent is, "If it is too good to be true, it probably is." This is especially true in the coin collecting hobby. There may be many "good deals" on the Internet or at local flea markets, but 99 times out of 100 you'll end up getting ripped off. This includes overpriced coins and coins that are counterfeit. Developing a relationship with a coin dealer will help you avoid making bad investments by purchasing these overpriced or counterfeit coins.
Another trap that beginning coin collectors tend to fall into his buying a low-quality coin at a bargain-basement price. What you end up with is a bargain-basement coin that will always be at the lower end of the value range. Take the time and patience to purchase quality coins that will increase over time.Continue to 5 of 5 below.
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The Bottom Line
Just like any investment, there is risk involved. The investment may go up in value, or it may go down. The wise investor will know that they are a "coin collector" first and a "coin investor" secondly. When the market is going down, you will still be able to enjoy your coin collection while you are waiting for it to go back up. Additionally, make sure that your investment portfolio is balanced and that you do not have an inordinate amount of your assets invested in your coins.